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Financial Planning / Tax Strategies


Subject:  Re: gift tax Date:  6/11/2013  11:55 AM
Author:  BruceCM Number:  118668 of 132874

If one gifts more than the annual gift exclusion amount to another individual, and the giftor has not given more than $5.25MM in their lifetime, then there is no gift tax due. However, the giftor must file a gift tax return for the amount exceeding the annual exclusion ($14,000 this year)(note: there is also a provision for making gifts that are not of current value, all of which constitutes gifts in excess of the annual exclusion, but I won't go into that here, as it does not apply)

What happens to the filed gift tax return (form 709) is the gift tax is calculated on the gifted amount and then subtracted from the lifetime estate tax credit, reducing the amount of the credit. Future year gifts subject to gift tax also have the gift tax calculated and subtracted from the remaining credit. If gifts continue to be made in future years that exceed the gift exclusion, the calculation of gift tax and deduction from the lifetime credit will continue until the credit reaches zero. From that point on, gift tax will be due in the year the gift exceeding the annual exclusion amount is made.

The vast majority of people (99%?) will not have estates large enough to be subject to estate tax at death, so giving a few $thousand once or twice in ones lifetime in excess of the annual exclusion and having to file a 709 will, for them, not create a tax...only paperwork.

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